Oil Falls After Middle East Gain, Set for Weekly Drop

(Corrects to show Iraq exports from Kurdish region in
second paragraph.)

Oil fell in New York and headed for a
third weekly decline on speculation the biggest gain in two
months yesterday was exaggerated amid rising supplies.

Futures slid as much as 0.4 percent after surging 4.1
percent yesterday on concern tension between Turkey and Syria
will disrupt Middle East output. Saudi Arabia, OPEC’s biggest
crude producer, sees no difficulty in meeting demand, according
to Oil Minister Ali al-Naimi. Iraq’s exports from its Kurdish
northern region will increase to 200,000 barrels a day from
170,000 “within days,” Oil Minister Abdul Kareem al-Luaibi
said. Prices may drop next week as U.S. production rises, a
Bloomberg survey showed.

“The situation with the oil market is that current and
forecast future demand levels over the next 12 months are well
covered by supply and that’s been the driving factor behind the
decline we’re seeing in recent weeks,” said Ric Spooner, a
chief market analyst at CMC Markets in Sydney. “The most likely
scenario is that this will continue to be the case.”

Crude for November delivery fell as much as 36 cents to
$91.35 a barrel and was at $91.43 in electronic trading on the
New York Mercantile Exchange at 10:04 a.m. in Tokyo. The
contract rose $3.57 to $91.71 yesterday. Prices are down 0.8
percent this week, for the longest run of weekly declines since
June, and 7.5 percent this year.

Brent oil for November settlement was down 45 cents, or 0.4
percent, at $112.13 after advancing $4.41 yesterday on the
London-based ICE Futures Europe exchange. The European benchmark
crude was at a premium of $20.70 to New York-traded West Texas
Intermediate grade.

Turkey-Syria Tension

Prices surged yesterday as Turkey’s parliament authorized
the government to order military action in Syria after a mortar
bomb fired across the border on Oct. 3 killed five Turks. The
decision highlights the risk that neighboring countries may be
drawn into Syria’s civil war. Countries in the Middle East and
North Africa were responsible for 36 percent of global oil
production and held 52 percent of proved reserves in 2011,
according to BP Plc (BP/)’s Statistical Review of World Energy.

Twenty-one of 38 analysts in the Bloomberg survey, or 55
percent, forecast oil prices in New York will drop through Oct.
12. Thirteen respondents, or 34 percent, predicted they will
gain and four said there will be little change. U.S. crude
output rose to 6.52 million a day last week, the most since
December 1996, an Energy Department report on Oct. 3 showed.

High Prices

Oil prices have been “very high” this year even with an
economic slowdown in many countries and the Organization of
Petroleum Exporting Countries is helping to keep them under
control, al-Naimi said yesterday at a conference in Ankara,
Turkey. Brent will stay between $100 and $120, which is
“acceptable for all,” Iraq’s al-Luaibi said at a meeting of
the oil ministry in Baghdad yesterday.

Crude is on course for its strongest second half of the
year on record, according to the median of 26 analyst estimates
tracked by Bloomberg. WTI will cost $94.50 a barrel in New York
this quarter, up from $92.20 in the previous three months, the
predictions show. The previous highest level for any second half
was $91.78 a barrel in 2011.